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Is your business ready for the National Living Wage?

Is your business ready for the National Living Wage?

Last week the National Minimum Wage (NMW) for adults aged 21 and over increased by 20p to £6.70 per hour – and bigger changes are coming soon.

The story so far

Since the introduction of the NMW in 1999, HR and payroll specialists have gradually got used to the summer scuffle to accommodate the increase in rates every October.

For some employers the annual increase in the NMW may trigger no more than a quick audit of the payroll, just to make sure that no workers will fall below the new rates. For the rest of us there is a whole lot of work to be done every year to introduce the new rates, while keeping an anxious eye on costs, prices, profit margins, pay relativities, employee relations, and even the survival of the business.

Don’t get me wrong, I am a supporter of the NMW in principle. And on the whole I have found that juggling the budgets every year so that the new rates can be put in place has resulted in sensible cost savings elsewhere, and valuable increases in productivity. So far, it’s been worth it.

Over the last ten years the adult NMW has increased by a total of 32.7%, so this month’s increase of 3.1% is fairly typical of what we have come to expect. Hopefully most employers will have been able to cope with the increase in the usual ways, and the benefits will outweigh any difficulties in implementing the new rates. But the NMW is about to go through a sea-change, and for employers who compete in low paid business sectors there may be precious little room left to manoeuvre.

Coming soon – the National Living Wage

April is only just around the corner, when the new National Living Wage for workers aged 25 and older will leap up by a further 7.5% to £7.20 per hour.

Now is the time for employers to sit down and analyse the effect that this will have on their business, as substantial changes may be needed.

Act now

Don’t panic – not yet at least. Here are my Top Ten Tips for work that can be done now to prepare for the new rates next April.

1. Work out how much the NMW and new living wage is going to cost your business
2. Consider whether the market will support an increase in prices
3. Calculate how much an increase in sales would contribute
4. Review existing job roles – a restructure could help to cut costs
5. Look at other terms and conditions of employment that could be changed (e.g. sick pay)
6. Talk to your employees– they may have some great ideas
7. Critically review your overheads
8. Deal with employee issues that are costing money (e.g. poor performance)
9. Carry out a green energy assessment
10. Act now – some changes may require formal consultation with employees

Click here for a link to all the current minimum wage rates

Posted by Christine Rimmer on 06.10.15

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